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In simple terms, life insurance is a tool for managing risk, a contract between an insurance company and an individual. In exchange for premiums paid to the insurance company, a death benefit—that is, tax-free money—is paid to the person or persons you designate. Life insurance can provide peace of mind and financial protection for your loved ones.
Insurance helps ease the financial burden on those you love when you die. Final expenses and even basic funerals can cost thousands of dollars, at a time when your spouse or family may not be prepared to shoulder the cost. Mortgage payments don’t stop when someone dies, and insurance can ease the burden of monthly payments making it possible for your family to keep their home. The family income could be affected drastically when you die. Replacing this income through insurance can help the family maintain their current standard of living and cover expenses associated with raising children and providing for their education.
The two main types of life insurance are Term and Permanent life insurance.
A term life insurance policy protects you for a set period of time or certain number of years. When the term is up, you have the choice to renew it or let it end; it has no value at the end of the term. Term life insurance policies typically offer a higher payout at a lower cost than permanent insurance, but they do not build value during that time. Nonetheless, they can provide a solution for many applications, such as covering a child’s college education, or paying a home mortgage to protecting your family from that financial burden after your death.
A permanent life insurance policy stays in force as long as you continue to pay the premiums—you do not outlive the coverage—and over time, the policy builds cash value. Different types of permanent life insurance policies are available, and coverage can be tailored to meet your needs.
Whole Life Insurance policies are the most widely known. For a fixed monthly or annual payment (premium) you receive a fixed death benefit and during your lifetime, the policy accumulates value—which you can borrow against, withdraw, or invest.
Universal Life Insurance add flexibility to the mix. Both the premium and death benefit can be flexible, allowing for larger or smaller payments.
Indexed Universal Life Insurance is similar to Universal Life; however, an important difference is that the way the interest is credited to the policy’s cash value. Interest is not a fixed rate, instead, it is based upon stock market indexes.
Variable Universal Life Insurance blends attributes of the other types of permanent insurance. Flexible premiums and death benefits are possible and the cash accumulation in dependent upon the performance of investments.
Many different life insurance policies from a wide variety of insurance companies are available to meet your needs. The team at Johanson & Yau are experienced in helping provide you with life insurance quotes from insurers that offer products appropriate to your needs. We take a comprehensive view of your financial situation and consider all factors that shape insurance decisions.
Education is important, and we make sure that you have a clear understanding of all the ins and outs of insurance policy recommendations tailored to your situation. Several factors contribute to the price a person pays for life insurance, including age, gender, family medical history and lifestyle habits such as smoking or high-risk hobbies.
We’re here to help you navigate the questions and decisions associated with selecting life insurance to manage risk and protect your loved ones all as part of a well-rounded financial plan.